Is it easier to get financing for a mobile home than for a traditional home?

Getting a loan on a mobile home – or, more accurately, on a prefabricated home – has always been more difficult than getting a conventional home loan. This is less the case today, but the mortgage interest rate of your prefabricated house will likely be higher than that of a conventional home loan.

The Bad Rap on Mobile Homes

Mobile homes have had a bad social and economic reputation. As insane and imprecise as its point of view may be, the derogatory view of mobile home communities that underlies this attitude has disadvantaged people who are looking for a mortgage on a prefabricated home. Some lenders are always reluctant to lend to someone they identify as “the kind of person who lives in a trailer park”.

Lenders may also erroneously believe that even when the borrower finances a fixed parcel of land and a prefabricated house, the borrower can simply attach the prefabricated house to his car and scare him away in the event of a financial problem.

It is still misunderstood that prefabricated homes are poorly constructed and inferior to conventional homes, despite the fact that strict HUD requirements ensure that existing manufactured homes are well built, code-compliant and durable.

Finally, some lenders are reluctant to lend money to prefabricated homebuyers because they believe that, unlike conventional homes, prefab homes are depreciating. In fact, over the past 20 years, homes in manufactured home communities such as those in the Sacramento Delta have appreciated rapidly, with rates of appreciation higher than the national average for conventional homes. Prefabricated homes in the Isleton area are now resold over 150,000 euros.

In spite of these persistent and erroneous beliefs, many lenders will finance the purchase of a mobile home, either with a movable hypothec or with a conventional loan.

Mortgages

If a mobile home will be located on a leased property, banks and other mortgage providers for conventional homes will not generally lend a mortgage to the borrower. When the land is rented rather than held, the borrower can still get a mortgage, which is a mortgage on personal property and similar to a car loan.

Mortgage rates are generally higher than those for conventional mortgages. Mobile mortgage lenders typically indicate annual percentage rates on fixed rate mortgages that exceed traditional loan rates by several points. 21st Mortgage Corporation and Vanderbilt Mortgage and Finance, two subsidiaries of Clayton Homes, are the two largest providers of furniture loans. Both companies are subsidiaries of Clayton Homes, itself a supplier of manufactured homes and a division of Berkshire-Hathaway. Not everyone is a fan of Clayton Homes; a 2015 Seattle Times article described the company as a predator, referring to real estate loans made with this lender with APRs of up to 15%.

Conventional mortgages

If you are looking for a mortgage on a prefabricated house that is part of a loan package that includes the land on which the house is going to sit, your ability to obtain conventional financing improves considerably.

In 2017, you can get a fixed-rate loan guaranteed by the FHA for a period of 20 years, for example, for a maximum amount of about US $ 93,000 to buy a prefabricated house and the land on which it will be built. built. Interest rates vary, but according to the Office of Consumer Financial Protection, the rates on housing and manufactured real estate projects in 2015 were just under 7%. At that time, conventional 30-year rates were two to three percentage points lower.